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Introduction
Employee compensation
All forms of pay or rewards going to employees and arising from their employment.
Performance Based
Piecework (calculated rate per piece) Sales commission
Combination
Sales
2005 Prentice Hall Inc. All rights reserved. 113
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1. Legal factor
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Contd
Top management remuneration: The Companies Act, 1956: An upper ceiling of 15000/month(1991) Sec. 198: shouldnt exceed 11% of net profits Sec. 309(1): Remuneration Committee
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Corporate Policy
Aligned reward strategy
a total reward package Compensation strategy has an impact on companys productivity E.g. Oracle, Microsoft Various issues like Seniority based pay or performance based pay Salary Compression: 5th and 6th pay scales, outcome of inflation Geography: e.g. Motif in Ahmedabad
2005 Prentice Hall Inc. All rights reserved. 118
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Price Benchmark jobs with the help of surveys Place 20% or more positions directly in the market place Collect data on Insurance, sick leave, vacation
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Compensable factor
Skills, effort, responsibility, and working conditions (Equal Pay Act) Knowledge, Problem Solving, Accountability (Hay Consulting firm, Wal-Mart)
2005 Prentice Hall Inc. All rights reserved. 1114
Establishing Pay Rates (contd) Step 3. Group Similar Jobs into Pay Grades
A pay grade is comprised of jobs of approximately equal difficulty or importance as established by job evaluation.
Point method: the pay grade consists of jobs falling within a range of points. Ranking method: the grade consists of all jobs that fall within two or three ranks. Classification method: automatically categorizes jobs into classes or grades.
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Wage Structure
Note: This shows overlapping wage classes and maximumminimum wage ranges.
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CTC
The total expenditure company would incur to employ the employee Includes monetary and non monetary benefits such as monthly pay, Accommodation, canteen facilities, telephone, medical reimbursements etc.
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Components of salary
Basic salary Allowances : DA HRA Conveyance allowance Reimbursements: Meal Coupons Mobile and Telephone bills Medical reimbursements
2005 Prentice Hall Inc. All rights reserved. 1121
Contd
Retirement benefits: PF Gratuity Other Benefits and Perks LTA Medical allowance (health facilities) Insurance Miscellaneous benefits (servants, furnishings, company car etc.)
2005 Prentice Hall Inc. All rights reserved. 1122